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Exhibit 4.2




AMENDMENT NO. 1 TO RIGHTS AGREEMENT




     Amendment No. 1, dated as of August 14, 2008 (this “Amendment”), to the Rights
Agreement, dated as of May 4, 2007 (the “Rights Agreement”), by and between Peerless Mfg.
Co. (the “Company”) and Mellon Investor Services LLC, as rights agent (the “Rights
Agent”).



RECITALS




     WHEREAS, the Company entered into an Agreement and Plan of Merger, dated as of January 10,
2008 (as it may be amended or supplemented from time to time, the “Merger Agreement”), by
and among PMFG, Inc. (“Parent”), PMFG Merger Sub, Inc. (“Merger Sub”), and the
Company;



     WHEREAS, the Board of Directors of the Company has determined that the Merger Agreement, on
the terms and subject to the conditions set forth therein, and the transactions contemplated
thereby, including, without limitation, the Merger (as defined in the Merger Agreement), are
advisable and in the best interests of the Company and its shareholders;



     WHEREAS, the Board of Directors of the Company has approved the Merger Agreement and declared
it advisable;



     WHEREAS, a special meeting of the Company’s shareholders is scheduled to be held at 10:00 a.m.
Dallas, Texas time on August 14, 2008, at which the Company’s shareholders will be asked to approve
the Merger;



     WHEREAS, the Board of Directors of the Company has determined that it is in the best interests
of the Company and its shareholders to amend the Rights Agreement as set forth in this Amendment;



     WHEREAS, pursuant to Section 27 of the Rights Agreement, prior to the time at which the Rights
cease to be redeemable, and subject to the last sentence of Section 27 of the Rights Agreement, the
Company may in its sole and absolute discretion, and the Rights Agent will if the Company so
directs, supplement or amend any provision of the Rights Agreement in any respect in accordance
with the provisions of such Section; and



     WHEREAS, pursuant to the terms of the Rights Agreement and in accordance with Section 27
thereof, the Company has directed that the Rights Agreement be amended as set forth in this
Amendment, and hereby directs the Rights Agent to execute this Amendment.



AGREEMENT




     NOW THEREFORE, in consideration of the foregoing and the mutual agreements set forth in the
Rights Agreement and in this Amendment, the parties hereto hereby amend the Rights Agreement as
follows:



     1. Section 1(j) of the Rights Agreement is hereby amended and restated in its entirety as
follows:



 









 





     “(j) “Expiration Date” means the earliest of (i) the Close of Business on the tenth
anniversary of the Record Date, (ii) the time at which the Rights are redeemed as provided in
Section 23 (iii) the time at which all exercisable Rights are exchanged as provided in Section 24
and (iv) the time immediately prior to the Effective Time (as defined in the Merger Agreement), but
only if the Effective Time shall occur.”



     2. Section 1 of the Rights Agreement is hereby amended by adding the following new Section
1(nn) immediately following Section 1(n):



     “(nn) “Merger Agreement” means the Agreement and Plan of Merger, dated as of January
10, 2008, as it may be amended or supplemented from time to time, by and among PMFG, Inc.
(“Parent”), PMFG Merger Sub, Inc. (“Merger Sub”), and the Company.”



     3. Section 1 of the Rights Agreement is hereby further amended by adding the following new
paragraph at the end of that Section:



     “Notwithstanding anything in this Agreement to the contrary, none of Parent, Merger Sub, any
of their Affiliates or Associates or any of their permitted assignees or transferees shall be
deemed an Acquiring Person, none of a Distribution Date, a Share Acquisition Date, a Flip-in Event,
a Flip-over Event or a Triggering Event shall be deemed to occur or to have occurred, and the
Rights will not become separable, distributable, unredeemable, triggered or exercisable, in each
such case, by reason or as a result of (i) the approval, execution, delivery or performance of the
Merger Agreement, (ii) the consummation of the Merger (as defined in the Merger Agreement), (iii)
the consummation of the other transactions contemplated by the Merger Agreement, or (iv) the
announcement of any of the foregoing.”



     4. Exhibits A and B to the Rights Agreement shall be deemed amended in a manner consistent
with this Amendment.



     5. Capitalized terms used without other definition in this Amendment shall be used as defined
in the Rights Agreement.



     6. This Amendment will be deemed to be a contract made under the internal substantive laws of
the State of Texas and for all purposes will be governed by and construed in accordance with the
internal substantive laws of such State applicable to contracts to be made and performed entirely
within such State; provided, however, that all provisions regarding the rights, duties and
obligations of the Rights Agent shall be governed by and construed in accordance with the laws of
the State of New York applicable to contracts made and to be performed entirely within such State.



     7. The Rights Agreement shall not otherwise be supplemented or amended by virtue of this
Amendment, but shall remain in full force and effect.



     8. This Amendment may be executed in any number of counterparts and each of such counterparts
shall for all purposes be deemed to be an original, and all such counterparts shall together
constitute but one and the same instrument.



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     9. This Amendment shall be effective as of, and immediately prior to, the execution and
delivery of the Merger Agreement, and all references to the Rights Agreement shall, from and after
such time, be deemed to be references to the Rights Agreement as amended hereby.



     10. The undersigned officer of the Company, being duly authorized on behalf of the Company,
hereby certifies in his or her capacity as an officer on behalf of the Company to the Rights Agent
that this Amendment is in compliance with the terms of Section 27 of the Rights Agreement.



     11. By its execution and delivery hereof, the Company directs the Rights Agent to execute this
Amendment.



     IN WITNESS WHEREOF, this Amendment has been duly executed by the Company and the Rights Agent
as of the effective time stated above.



	 	 	 	 	 
	 	PEERLESS MFG. CO.

 	 
	 	By:  	/s/ Henry G. Schopfer, III
 	 
	 	 	Name:  	Henry G. Schopfer, III 	 
	 	 	Title:  	Chief Financial Officer 	 
	 
	 	MELLON INVESTOR SERVICES LLC

 	 
	 	By:  	/s/ Patricia Hodson
 	 
	 	 	Name:  	Patricia Hodson 	 
	 	 	Title:  	Relationship Manager 	 
	 




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